Affirm (AFRM) has matured as a public company and is taking aim at being the modern competitor to American Express (AXP), according to its CEO.
"From the very beginning we said we're trying to build a modern answer to American Express. I admire American Express greatly ... But it is a club and a club with a velvet rope, and you have to be good enough to be on the right side of the rope,” Affirm founder and CEO Max Levchin told Yahoo Finance at the Goldman Sachs Communacopia and Technology Conference this week.
“I wanted to build a payment system for anyone who wants to be a part of something that stands for no late fees, no deferred interest, real transparency, real pro-consumer attitude, helping people get the things they want without having to get into debt that they can't repay. And that's what we are today."
It has been a wild ride to reach this point for the PayPal (PYPL) co-founder.
Affirm went public in early January 2021. The stock, initially priced at $49, skyrocketed to $100 by the close of its first day of trading, in part due to optimism around buy now, pay later companies and Levchin's strong reputation building tech businesses.
By late November, Affirm's stock hit $168 a share after the company landed deals with Amazon and Shopify.
However, come Jan. 3, 2023, Affirm shares closed at a record low of $9.03 as investors put pressure on unprofitable tech companies and the stock market adjusted to higher interest rates. A month later, Affirm laid off 19% of its workforce.
Despite the post-IPO stock volatility, Levchin has repeatedly told me he hasn't sold a single share. Today, he no longer views Affirm as a buy now, pay later company waging a singular war against rival Klarna.
Rather, it’s a broader payment platform that is looking to wrestle market share from the aforementioned Amex and PayPal.
The company has since introduced the Affirm Card, which offers no annual fees, hidden fees, or compound interest. It has also secured a deal to be integrated as a buy now, pay later option on Apple (AAPL) Pay.
Shares have rallied back to above $40 and are up 80% in the past year, according to Yahoo Finance data.
Along with the cost-cutting moves, Affirm's financials have improved as well.
For the fiscal year ended June 30, total revenue rose 46% year over year to $2.3 billion. The company posted $381 million in adjusted operating income.
Levchin says Affirm will be profitable on GAAP basis for the first time in the fourth quarter of its current fiscal year and will stay profitable thereafter.
"Affirm continues to fire on all cylinders, outgrowing e-comm/payment peers and flexing operational leverage," JPMorgan analyst Reginald Smith said in a client note.
Smith rates Affirm's stock at an Overweight, or a Buy equivalent.
To be fair, Affirm does have a way to go to catch the 174-year-old Amex.
Affirm's market cap of $12.5 billion is well shy of Amex's $180 billion.
The Street estimates Amex will haul in about $60 billion in sales in its current fiscal year. Affirm is pegged for around $3 billion in annual sales.
Says Levchin, "Now, the next few steps are just to get bigger, just get more services, more consumers, and more merchants."
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Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
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